Frugal engineering – Indian Firms Shift Focus to the Poor

by Dave

This kind of innovation can serve all Bottom of the Pyramid markets. In Latin America about 25% percent of the people (130 or so million) live on less than $2 a day.
WSJ.com

India’s many engineers, whose best-known role is to help Western companies expand or cut costs, are now turning their attention to the purchasing potential of the nation’s own 1.1-billion population.

The trend that surfaced when Tata Motors’ tiny $2,200 car, the Nano, hit Indian roads in July, has resulted in a slew of new products for people with little money who aspire to a taste of a better life. Many products aren’t just cheaper versions of well-established models available in the West but have taken design and manufacturing assumptions honed in the developed world and turned them on their heads.

For the farmer who wants to save for the future, one Indian entrepreneur has developed what is, in effect, a $200 portable bank branch. For the village housewife, a wood-burning stove has been reinvented to make more heat and less smoke for $23. For the slum family struggling to get clean water, there is a $43 water-purification system. For the villager who wants to give his child a cold glass of milk, there is a tiny $70 refrigerator that can run on batteries. And for rural health clinics, whose patients can’t spend more than $5 on a visit, there are heart monitors and baby warmers redesigned to cost 10% of what they do elsewhere.

Such inventions represent a fundamental shift in the global order of innovation. Until recently, the West served rich consumers and then let its products and technology filter down to poorer countries. Now, with the developed world mired in a slump and the developing world still growing quickly, companies are focusing on how to innovate, and profit, by going straight to the bottom rung of the economic ladder. They are taking advantage of cheap research and development and low-cost manufacturing to innovate for a market that’s grown large enough and sophisticated enough to make it worthwhile.

GE’s chairman, Jeffrey Immelt, on a recent tour of Asia, outlined how the global giant is restructuring to take advantage of what he calls “reverse innovation.” While in India this month, he said the innovations in medical equipment [in India] could eventually help bring down the cost of health care in the U.S.

To bring banking services to villages, Anurag Gupta, a telecommunications entrepreneur, distilled a bank branch down to a smartphone and a fingerprint scanner. A bank representative goes directly to a village and can set up shop anywhere there is shade. Savers line up and give an identification number, scan their fingers and then deposit or withdraw small amounts of rupees. The transactions are recorded through the phone and the representative later visits a standard branch to pick up or drop off rupees as needed.

Mr. Gupta named his innovation Zero, after what he says is India’s most important innovation — the number zero — which many believe was invented by Indian mathematician Aryabhata in the sixth century. Indian banks already are using his system to open millions of new accounts. The running cost of his “branches” is about $50 a month to serve hundreds of people daily. A standard branch or ATM costs thousands to run.

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